The Pensions Regulator (Louise Davey, Director of Regulatory Policy, Analysis and Advice) has published a blog entitled "The ESG elephant is now in the room", explaining why ignoring environmental, social and governance factors is no longer an option for trustees.
As the blog states, a few years ago it would have been rare for pension trustees to consider ESG factors. However, that has changed because of developments in government policy, increased regulation, industry initiatives and greater awareness of the implications for life if action is not taken on climate change and biodiversity loss.
The Regulator acknowledges that there have been concerns around availability and quality of data, effective modelling of outcomes and impacts, the implementation risks of greenwashing and the potential for green hushing (where firms keep quiet about their emissions reductions targets to avoid scrutiny). However, although these are legitimate concerns, they shouldn't be a barrier to trustees meeting their legal duties.
In the blog, the Regulator reiterates the regulatory initiative that it is taking in relation to SIPs and ISs. Further, that trustees need to improve their understanding of climate, ESG and wider sustainability issues.
With expertise and experience in this area, our pensions team can help you understand your obligations in this area
Should you wish to consider any ESG issues further, do take a look at our interactive guide, which has been designed to help you easily navigate the law and guidance surrounding ESG.